Everybody had been hysterical about cheap Chinese cars that would soon flood the market, but it didn’t happen. Quite the opposite is happening: Joint venture brands, led by General Motors, are grabbing a larger and larger share of the Chinese market. And foreigners are gearing up to get China a chunk of the world market.

Reuters reports that joint venture with France’s PSA and China’s Changan has big export plans. According to the report, the JV “plans to sell premium cars in China, the world’s biggest auto market, and in some overseas markets.” Not cheap cars. Premium cars.

The JV will set up a research and development center to develop its own brand, as well as the Peugeot and Changan brands. And it plans to export all.

“It is the first joint venture to be allowed to set up an overseas production base and operate the export of multiple brands,” the company said in a statement.

The JV will most likely start with the Citroen DS line, debuted at the 2011 Shanghai auto show.

Swallowing the national pride and using foreigners as export vehicles makes sense for China. The same strategy contributed a lot to the Indian industry which turns into an export powerhouse, as we speak.

Makes a lot of sense as a business strategy.
The quality of the cars is probably good enough as the knowledge to build good cars was brought by the American and European cars in the JV.
The costs are lower (for now) by producing them in China.
The only downside I see is the increased lead times that offshoring to China causes and the explicit and hidden costs associated with it. I am assuming a team of people at GM and Peugeot already calculated those.

So the only real problem is the political one. So who should win? Business or Political strategy?

The Chinese JV’s are starting to flex muscles in other countries. SAIC is starting a very aggressive onslaught into the Indian market on behalf of GM, now that they own 50% of GM India. There will be 5 new models including one commercial vehicle to take on Maruti Suzuki and others. SAIC has the resources and is not afraid to throw some punches if necessary to double GM India’s market share in 3 years. They are very confident that they will achieve this.

Yay, now our cars can be made in China too. I just noticed some books I had shipped to me in the USA were printed in China…

Crazy, book is printed in China, can’t buy it in China. I can have it shipped back to China though. I wonder.. will the Car market end up the same way? Built in China, can’t buy in China, but can be imported back to China?

We have been saying it for a while: The only way to increase exports from China is to export joint venture cars made in China.

Not the only way, but a prudent first step to ensure that the cars are up to international safety and quality standards by leveraging the expertise of foreign automakers. The Chinese companies will eventually get their act together like the Japanese and Korean automakers.

The other drivers are that the foreign companies want to take advantage of lower manufacturing costs in China and reduce currency exchange risks.

First the Chinese will do joint deals… then, once they have mastered our technology, they will nationalize foreign assets, sell below cost, and then, after wiping out competitors, control the industry. China will have industrial jobs, and the US will have nothing but minimum wage service industry work. Winning!